10 Ways Companies Fool You To Spend More

Times are gone when companies used to make a killing out of gullible customers, when pushy salesmen with plastic smiles could sell a refrigerator to a person living on the North Pole. In the internet age, the modern customer is well-informed and is not fooled by marketing gimmicks. However, with tough competition, companies have also gone smarter. They started hiring mathematicians, data analysts and psychologists to study the behavioral trend of consumers, shopping patterns and make them spend more. You might be thinking you are smart enough not to fall a prey to their strategies, but these companies are reaping millions of dollars through these tactics. Next time when you go to as supermarket or a movie theater, be careful, you might be walking into one of these traps:

Decoy effect – Ever walked into a movie theater and felt the need to buy popcorn. You go to the store and see the following options in the menu:

Small…………..$3.00

Medium……..$6.50

Large…………..$7.00

Which one would you buy? I can already hear you saying, "The large one", because it is only 50 cents more than the medium.

Now let’s look at the other scenario where you have the following menu:

Small…………. $3.00

Large…………. $7.00

Now, which one would you buy? Most buy the small one, because 7 dollars look too costly for popcorn. In fact, the ‘Medium’ option at 6.50 dollars is a decoy to enable you to push towards the higher price range. ‘Economist’ used the same principle to increase the sales of their magazine by 30%.

2. Anchor effect – You will always be affected by the first price that the sales representative quoted you for an object and marketers use it to their advantage. When you go to a furniture store to buy a sofa set, a trained sales guy would take you to the most expensive set, let’s say for $6000. You get blasted out of your wits hearing the absurd price. Next he takes you to a sofa set with price range $3000, and you think you are getting a good bargain, although you can get a similar sofa at price of $1500. The gain of $3000($6000-$2500) looks more than the loss of $2000($3000-$1000).

3. Visibility effect – The biggest brand items are strategically placed at eye level to increase sales. In fact, companies pay a huge premium to get the eye level shelf in supermarkets.

4. Waiting effect – The more time we spend at supermarkets the more we buy. Marketers make use of this fact by placing common items of daily use like milk, eggs, juice as far apart as possible. This leads us moving through multiple racks in stores and picking up more items on the way. They also reorganize the supermarket on a periodical basis to the same end.

5. Compensation effect – The moment you enter the supermarket, the first item you are hit with are fresh fruits and vegetables. It seems illogical to place them first, as they are perishable items and should come last in the list so that they are not exposed for a long time. But marketers are aware of the fact that once you buy that basket of fresh fruits and vegetables you will feel good and won’t mind putting in that soda or beer can in the end to compensate. And that is where they earn higher margins.

6. Left Digit effect – This effect is widely used by almost all companies. In this case, marketers use our bias in giving higher importance to left digits of numbers. When you go to stores the items are priced as $99.99 instead of $100. While the difference between the 2 prices is just 1 cent, but due to greater affinity for left digits we agree to buy at 99 instead of a whopping 100 dollars (pun intended).

7. Smell effect – Have you ever wondered what a bakery is doing in a supermarket, when no one is usually looking there for a brownie. The fresh smell of cooking brownie activates our salivary glands and gives us the feeling we are hungry, when we are not. When we feel hungry, we start purchasing food items which we normally would have left.

8. Grouping effect – Supermarkets often pack or group items that go together to trick you into purchasing both. For example, when you are buying a pack of chips, you would not mind paying for a cheesy dip placed along with it.

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9. Impulse effect – Have you noticed the racks of chocolates, gums and candy when waiting in line for billing and felt the impulse to put it in the tray. This is the last strategy by the supermarkets to lure you to impulse buys when you get tired from shopping, which you may have resisted in other parts of the store.

10. Lather effect – This is the most killer strategy of all. How often have you purchased soap, detergent or toothpaste because it produces more lather (foam) than others? In fact, most detergents and toothpaste in the market produce enough lather for cleaning, but it is our bias of associating more lather with better cleaning that companies add chemicals to the product for the same and price it higher. We buy it in the comfort, that it is higher priced as it is a more effective cleaner.

With the advances in behavioral economics and more advanced methods used by companies to analyze reams of data about consumer preferences, buying habits, and even their changing lifestyle, new ways of increasing customer purchases get developed every day. In fact, some supermarkets like Target have gone so far as to hire mathematicians to predict when a woman gets pregnant by analyzing her buying patterns. Catching expecting parents at this crucial moment becomes important because they stay loyal to the first brand of diapers or baby shampoo they buy and start buying other items of daily use from the same place. In fact, they have been so exact, in one case, the models by Target’s statistician Andrew Pole predicted a teenage girl as pregnant before her father did. To know more about his strategy and how he enabled Target to grow phenomenally from $44 billion in revenues in 2002, when Pole got hired, to $67 billion in 2010 read the Power of Habit by Charles Duhigg.